What’s in a Name? Some Thoughts on the Joseph Abboud Case

June 27, 2009

Douglas Hand with contributions from Xiyin Tang

Can Designers Contract Away The Right to Use Their Name Commercially?

For many designers, the idea of contracting away—and thus giving up—the right to use their name commercially is inconceivable. And yet that is exactly the dilemma of fashion designer Joseph Abboud. After Abboud’s two-year-long battle to win back the right to use his own name after he supposedly contracted it away to JA Apparel, the District Court for the Southern District of New York placed certain restrictions on the rights of Abboud to use his name in advertising and other marketing materials, while nonetheless allowing him limited rights under the Lanham Act’s Fair Use defense.

The Background of JA Apparel Corp. v. Joseph Abboud

Designer Joseph Abboud registered his personal name, “Joseph Abboud,” as a trademark with the US Patent and Trademark Office in the late ‘80s. In 1988, Abboud’s wholly-owned corporation, Houndstooth, entered into a joint venture with another company (GFT International B.V.) creating JA Apparel. Abboud then licensed his “Joseph Abboud” trademarks to JA Apparel, who began using the trademarks in the marketing, manufacture, and sale of its products. In 1996, GFT bought out Abboud’s interest in the joint venture, and JA Apparel became a wholly-owned subsidiary of GFT.

On June 16, 2000, JA Apparel entered into a Purchase and Sale Agreement with Abboud. In exchange for a payment of $65.5 million, Abboud sold all of his rights, title, and interest in “[t]he names, trademarks, trade names, service marks, logos, insignias and designations…and all trademark registrations and applications therefor…and all other Intellectual Property.”

In 2005, Abboud’s relationship with JA Apparel soured, and he left the company shortly after. In early 2007, Abboud began developing a new clothing line, which he called “jaz”. In marketing and press materials for the new line, “jaz” was identified as “a new composition by designer Joseph Abboud.” JA Apparel then brought suit, claiming breach of contract, trademark infringement, and unfair competition.

The Lawsuit

The district court was initially in favor of plaintiff JA Apparel, deciding that the word “names” in the Purchase and Sale Agreement unambiguously granted JA Apparel the commercial right not just to the Joseph Abboud trademark, but also to Abboud’s personal name. On appeal, however, the Second Circuit vacated the district court’s decision, stating that the Purchase and Sale Agreement was not clear on whether “names” refers to both the Joseph Abboud trademark and Abboud’s personal name. The district court, on remand, decided that, based on extrinsic evidence, the Agreement was only intended to convey rights to the Abboud trademarks and related intellectual property. Thus, Abboud still retained some rights to use his personal name commercially.

Next, the court addressed whether Abboud’s proposed uses of his name in connection with the new “jaz” line constituted trademark infringement. The court used the “fair use” defense of the Lanham Act, which allows for the use of a term even if it causes some customer confusion as long as Abboud is only using his name (1) descriptively, (2) other than as a trademark, and (3) in good faith. Accordingly, the court ultimately determined that Abboud was permitted to use the term “Joseph Abboud” in promotional and advertising materials only in the context of a complete sentence or descriptive phrase, and could be no larger or more distinct than the surrounding words in that sentence or phrase. Furthermore, Abboud was required to include a disclaimer of any affiliation with JA Apparel and products sold under the Joseph Abboud trademarks. However, Abboud is permanently enjoined from using his name as a trademark, service mark, trade name or brand name, including on clothing labels, hang-tags, or product packaging.

What This Means For…

Designers

“A good name, like good will, is got by many actions and lost by one.” –Lord Jeffrey

Obviously, designers should understand just what asset of theirs they are giving up when signing any agreement. As the Abboud case shows, a designer can be enjoined from using his or her own name as a trademark or brand, in addition to any attempt to trade off the good will the name carries with it. After a company has purchased a personal name trademark and the goodwill associated with that mark, courts will view any attempt by the designer to recapture some of the benefits of his or her name (including, for example, its association with talent, skill, or artistic ability) unfavorably.

While the fair use defense allows Abboud to continue to engage in limited use of his name, Abboud is nonetheless severely limited by its 3 factors. Above all, designers must not act in what is perceived to be “bad faith”—that is, he must refrain from any act that intentionally trades on the good will of the contracted-away trademark by creating confusion as to source or sponsorship. In effect, fair use by no means allows the designer to continue to capitalize on the established reputation of his or her name.

Acquirers

What’s in a name? In many ways, the Abboud case centered on the perils of sloppy drafting—namely, on the word “names.” Courts are reluctant to interpret contractual terms that are clear, but when, as in Abboud, the writing is determined to be ambiguous, extrinsic evidence is admitted.

Companies looking to purchase a designer’s most valuable asset—his or her “name” and the goodwill associated with such name—should engage in careful drafting to ensure that the language adequately reflects those intentions. The contract must clearly specify which—the trademark name, the personal name, or both—asset of the designer’s the company is acquiring.

Remember, even if a company acquires the rights to a designer’s trademark, the designer can still use his or her name as a descriptive term in a competing venture. On the other hand, Abboud suggests that if a company were to acquire rights to both the trademark and the personal name, fair use will not be an adequate defense on the designer’s end (seeJA Apparel Corp. v. Abboud, 591 F. Supp. 2d 306, 327 (S.D.N.Y. 2008)).

If you have any further questions or are seeking legal advice, contact Hand Baldachin & Amburgey LLP at 212.956.9500 or via email at info@hballp.com.